Prices of Australian Carbon Credit Units (ACCU) fell by 18pc over the April-June quarter, falling further in July but recovering by mid-August as demand increased, according to the nation's Clean Energy Regulator (CER).
Generic ACCUs — each of which equate to 1t of CO2 — fell from A$39 ($25) in early April to A$31.85 in late June, before bottoming out at A$24 in July and rebounding to A$32 in mid-August, according to the CER's latest Quarterly Carbon Market Report released on 25 September.
ACCUs last traded at A$30.40 on 26 September, according to New Zealand and Australian investment and advisory group Jarden. This remains below the average spot price of A$38/t recorded for January-March. There were 6.2mn ACCUs issued in January-June, with the CER expecting to issue 18mn in 2023.
Analysis and market intelligence suggests this activity was largely because of a number of intermediaries including traders selling down their market positions to free up capital, the CER said. Some evidence also suggests large-scale emitters are looking in-house to cut emissions.
Total holdings have grown to 27.6mn, compared with around 24mn ACCUs in the system on 31 March.
Australia's revamped safeguard mechanism came into effect on 1 July, meaning facilities identified under the scheme will be required to reduce net GHG emissions by more than 200mn t collectively by 2030. Carbon credits used to offset emissions will be capped at A$75/t under the new safeguard mechanism.
Holdings in safeguard mechanism accounts increased by900,000 over the year to 3.1mn in the year to 30 June, with the CER anticipating demand for ACCUs to grow further as affected entities implement compliance strategies.
The CER reported that 526MW of new large-scale renewables projects reached final investment decisions (FIDs) in January-June, with the CER expecting fewer FIDs given the near-record 4,363MW that reached FIDs in 2022. The record high was the 4,906MW in 2018.
The quarterly record of 2,100MW for Australia occurred in October-December 2022. The CER said it would downgrade its expectations of new FIDs to 2,500MW for this year, down from the 3,500MW previously predicted in June.
The CER's revision is because of higher costs, workforce shortages, connection and transmission risks, higher price power purchase agreements (PPA), limiting demand from retailers and corporates, as well as reduced certainty of future revenue.
There is an emerging trend towards shorter-term PPAs, the CER said, cutting certainty of future revenue and potentially affecting investment decisions.
Spot prices for large-scale generation certificates finished at A$54.50 on 30 June and subsequently hit A$55.50 in mid-August, slightly down from a year earlier.
